Dividend Policy in Perspective

Dividends Play an Important Role in Rewarding Shareholders, but Must be Viewed in the Broader
Context of the Varying Liquidity Needs of Shareholders and their Vision of the Company’s Future.

by François M. de Visscher

For many family firms, the lack of a dividend policy is a serious omission at best, and a recipe for a shareholder-relations disaster-or a family feud-at worst. At the same time, a dividend policy formulated without consideration of other liquidity options, and outside the context of the company’s overall capital needs, is also a serious mistake. There are many ways to slake the thirst of shareholders, particularly inactive shareholders, for liquidity. Dividends are but one.

Lack of liquidity is one of the most common sources of discontent voiced by the shareholders of family firms. As the family and the business grow, the disparity in the financial and economic goals of shareholders increases. The shareholders active in management want the business to grow and the stock to appreciate. They prefer to see “excess” cash reinvested in the business, rather than frittered away on dividends. But the inactive shareholders tend to see their equity as an investment on which they are entitled to a return comparable with other investments. Oftentimes they view the business more as a cash cow than a long-term family enterprise, especially if they do not have other sources of income. More…

Management Succession Issues in Family Business (Part I)

Management Succession Issues Cornell University
in Family Business (Part I)

by Bernard L. Erven, Professor and Extension Specialist
Department of Agricultural Economics, Ohio State University

Each family with a business faces the reality that the business will eventually end or have new managers.This reality is independent of the founding and previous managers’ successes in building the business and their current success and stature in the community.This paper focuses on key issues involved in facing this reality of management succession.In particular, the focus is set in the context of assistance to family business managers by extension specialists in the human ecology and agricultural sciences.

The human ecology and agricultural sciences have a rich history in teaching, research and extension designed to assist family businesses.Family has often been separated from business in this work.Serious attention to assisting family businesses with their succession planning and implementation requires that the family and business be fully integrated in analysis and programming.The “building bridges” theme of this conference is consistent with the practical problems of most concern in management succession in family businesses. More…